Australia Markets closed

Why the Elders share price stormed over 12% higher today

James Mickleboro
beat the share market

The Elders Ltd (ASX: ELD) share price has returned from its trading halt with a bang on Wednesday.

At the time of writing the agribusiness company’s shares are up over 10% to $6.77. At one stage they were up as much as 12.5% to $6.89.

Why is the Elders share price rocketing higher?

This morning Elders returned from its trading halt following the completion of the fully underwritten institutional placement and the institutional component of its entitlement offer.

According to the release, the placement and the institutional entitlement offer attracted strong support from both existing and new institutional shareholders, together raising approximately $100 million at an offer price of $5.55 per new share.

The company’s CEO and managing director, Mark Allison, was pleased with the outcome.

He said: “We are pleased with the strong support shown by new and existing shareholders for the equity raising and the acquisition of AIRR, which will give us a national wholesale platform of scale. We now look forward to completing the Retail Entitlement Offer for the benefit of Elders’ shareholders.”

That retail entitlement offer aims to raise approximately $37 million at $5.55 per new share.

Why is Elders raising funds?

Elders has undertaken this equity raising in order to fund the acquisition of Australian Independent Rural Retailers (AIRR).

AIRR is a member-based buying and marketing company for independent rural merchandise and pet and produce stores. It has a national wholesale platform supported by a network of eight warehouses servicing more than 1,500 customers.

Earlier this week Elders revealed that it has entered into a scheme implementation deed with AIRR to acquire 100% of its issued shares by way of a scheme of arrangement for $10.851 per share.

This consideration comprises 50% cash and 50% Elders scrip with a mix and match facility provided to AIRR shareholders. It values AIRR at $157 million on an equity value basis and $187 million on an enterprise value basis.


This acquisition will provide Elders with an entry into the wholesale rural services market, which gives it a valuable new growth channel.

Furthermore, the acquisition is forecast to deliver net synergies of $6.6 million to $9.33 million per annum, which will be gradually realised over the next two years. It is also expected to deliver low single digit EPS accretion on an FY 2019 pro forma basis before synergies and low double digit EPS accretion post synergies.

Also rising strongly on the All Ordinaries today is the Austal Limited (ASX: ASB) share price following the release of its guidance update and the Bubs Australia Ltd (ASX: BUB) share price on the back of no news.

If you like shares like Elders then I think you'll love these dirt cheap growth shares that have bags of potential.

NEW. Five Cheap and Good Stocks to Buy in 2019…

Our Motley Fool experts have just released a brand new FREE report, detailing 5 dirt cheap shares that you can buy today.

Stock #1 is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Stock #2 is another high-growth business trading near a 52-week low all while offering a 4.7% grossed-up yield...

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.


More reading

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended BUBS AUST FPO and Elders Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019